The Scope for Inflation Targeting in Developing Countries

Author/Editor:

Miguel A Savastano ; Paul R Masson ; Sunil Sharma

Publication Date:

October 1, 1997

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Inflation targeting (IT) serves as monetary policy framework in several advanced economies, where it has enhanced policy transparency and accountability. The paper considers its wider applicability to developing countries. The prerequisites for a successful IT framework are identified as an ability to carry out an independent monetary policy (free of fiscal dominance or commitment to another nominal anchor, like the exchange rate) and a quantitative framework linking policy instruments to inflation. These prerequisites are largely absent among developing countries, though several of them could with some further institutional changes and an overriding commitment to low inflation make use of an IT framework.

Series:

Working Paper No. 1997/130

Subject:

Banking Central bank autonomy Central banks Exchange rates Foreign exchange Inflation Inflation targeting Monetary policy Monetary policy frameworks Prices

English

Publication Date:

October 1, 1997

ISBN/ISSN:

9781451855159/1018-5941

Stock No:

WPIEA1301997

Pages:

53

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